1995Robert E. Lucas Jr.“For
having developed and applied the hypothesis of rational expectations,
and thereby having transformed macroeconomic analysis and deepened our
understanding of economic policy.”

1978Herbert A. Simon“For his pioneering research into the decision-making process within economic organizations.”

1977Bertil Ohlin and James E. Meade“For their pathbreaking contribution to the theory of international trade and international capital movements.”

1976Milton Friedman“For
his achievements in the fields of consumption analysis, monetary
history and theory, and for his demonstration of the complexity of
stabilization policy.”

1975Leonid V. Kantorovich and Tjalling C. Koopmans“For their contributions to the theory of optimum allocation of resources.”

1974Gunnar Myrdal and Friedrich August von Hayek“For
their pioneering work in the theory of money and economic fluctuations
and for their penetrating analysis of the interdependence of economic,
social and institutional phenomena.”

1973Wassily Leontief“For the development of the input-output method and for its application to important economic problems.”

The central contribution of Angus Deaton, the latest
winner of the Nobel Memorial Prize in economics, has been to shift the
gaze of his fellow economists beyond measures of income, to broader measures of
well-being.

Much of his research has focused on consumption — measures of the food
people eat, the condition of their housing, and the services they consume. And he
has been a trailblazer in shifting the attention of economists away from the
behavior of economywide aggregates such as gross domestic product, and toward
the analysis of individual households.

This is also the first Nobel to acknowledge explicitly the increasingly
empiricalnature of modern economic research. There are probably more such
Nobels to come.

Yet for all the power that modern statistics brings, Mr. Deaton has argued
forcefully that it is neither a panacea nor a substitute for economic theory.

He has been an influential counterweight against a popular strand of
econometric practice arguing that if you want to know whether something works, you
should just test it,
preferably with a randomized control trial. In Mr.
Deaton’s telling, the observation that a particular government intervention
worked is no guarantee that it will work again, or in another context. By this
view, theory is a complement to measurement, and generalizable insights arise
only when the underlying economic
mechanisms are elucidated and tested.

Angus Deaton was greeted by his
colleagues at Princeton University in Princeton, N.J., after he was awarded the
Nobel Memorial Prize in Economic Science.CreditPeter Foley/European Pressphoto
Agency

His method of careful analysis of data from household surveys has
transformed four large swaths of the dismal science: microeconomics,
econometrics, macroeconomics and development economics.

He has brought microeconomics — traditionally a field populated by
theorists — into closer connection with the data. Partly because of his
influence, modern microeconomists are more likely to spend their days knee-deep
in large-scale data sets describing the real-world decisions made by millions
of people, and less likely to be mired in Greek-letter abstractions.

Much of the empirical revolution in economics has been enabled by the tools
that Mr. Deaton developed. These tools reimagine the role of economic theory,
using it to organize and interpret the tidal wave of data coming from the
hundreds of household surveys conducted around the world each year.

This focus on empirics has been a boon for the field of econometrics, which
is the application of statistical methods to economic problems. Mr. Deaton’s
signature achievement in this area has been in forcing empirical researchers to
pay closer attention to questions of measurement. For too long, econometric
analysis had proceeded as if data were simply handed down from a statistician-loving
higher power. The reality is far uglier: Data are imperfect, surveys can be
unrepresentative, people misreport, and attempts to recontact survey
participants often fail. Mr. Deaton confronts these issues head-on, and he has
taught economists how to extract meaning from imperfect data.

For an economist focused on big-picture questions — issues of global
poverty — Mr. Deaton remains remarkably grounded in these smaller details. As
the Nobel committee put
it, Mr. Deaton’s “work covers a wide spectrum, from the deepest
implications of theory to the grittiest detail of measurement.”

More than any other economist I know, he understands that to get the big
picture right, you’ve got to get all the small details right, too.

This is a lesson that I learned firsthand, as my co-author (and significant
other) Betsey Stevenson and
I were puzzling over some data that appeared to show that people in certain
low-income countries nonetheless reported high levels of life satisfaction. Mr.
Deaton, who was equally perplexed, suggested that we dig a little deeper, as he
recalled that some of the surveys were not representative samples of the entire
population. Sure enough, several weeks of digging through the archives and
sifting through the appendices to old codebooks revealed Mr.
Deaton to be correct, and those puzzling observations to be simply the result
of pollsters surveying only richer (and therefore probably happier) people in
those poor countries. These statistical anomalies had partly hidden the strong
link between life satisfaction and average incomes.

Mr. Deaton has also made important contributions to macroeconomics, which
is the study of the economy as a whole. An earlier generation of
macroeconomists had focused on aggregate measures, such as the total levels of
consumption or income in the economy. Mr. Deaton turned instead to the behavior
of individual households. He was a leader among those rejecting the prevailing
fiction that the behavior of the whole economy could be treated as if it were
the result of choices made by a single representative consumer.

This distinction between individual and aggregate behavior is particularly
important to the study of consumption. While macroeconomists had been satisfied
that their theories could explain the relationship between the total level of
consumption and total income in the economy, Mr. Deaton showed that those same
theories struggled to explain what individual households were doing. This has
spawned a large and productive continuing research program trying to understand
the spending patterns of actual households.

In 1992, Mr. Deaton argued that
further progress on difficult economic questions would be likely “when
macroeconomic questions are addressed in a way that uses the increasingly
plentiful and informative microeconomic data.” He was right, and newly
available “big data” describing the individual saving, spending and investment
decisions of thousands and sometimes millions of people are fueling some of the
most important work in macroeconomics today.

But perhaps Mr. Deaton’s most important effect has been within the field of
development economics, which focuses on the economies of poor countries. This
is a research program born of deep personal conviction. As he recently wrote,
“Those of us who were lucky enough to be born in the right countries have a
moral obligation to reduce poverty and ill health in the world.”

A generation ago, development economics was a field populated by “country
doctors” — globe-trotting macroeconomists willing to make house calls to any
country willing to provide them with a first-class ticket, so that they could
proffer their preferred prescription, be it a more muscular industrial policy,
a big push of infrastructure development, increased national savings or a
faster shift to a market economy. The countries varied, but the prescriptions
rarely did.

Today, development economics is a far more interesting and nuanced field,
with practitioners focused on understanding the lives
of the poor, and in uncovering the subtle ways in which immature economic
institutions hinder their development. Rather than studying a few dozen
countries, modern development economists are likely to pore over data
describing the economic lives of thousands of families within each country. And
much of that data comes from his decades-long collaboration with the World
Bank, as his work has inspired much of its recent work on measuring and
assessing poverty. The result is a sharper picture of the incidence and causes
of global poverty.

More recently, Mr. Deaton has turned his attention to measures of
subjective well-being, including happiness. In his 2010
Presidential address to the American Economic Association, Mr. Deaton
highlighted the problems in constructing coherent measures of global poverty.
Measures of income don’t offer much insight unless they can be thought of in
terms of differences in purchasing power. But it is impossible to assess who
has more or less purchasing power when people in different countries face
different prices and choose to buy different goods. Given this problem, Mr.
Deaton makes the radical suggestion that economists just ask people about their
well-being instead.

Many of the most important findings on subjective well-being reflect new
sources of data that Mr. Deaton — together with the psychologists Ed Diener,
Arthur Stone and Daniel Kahneman, a fellow Nobel laureate — have helped create
through their role as a senior
scientists at Gallup. (Disclosure: I also serve as a senior scientist
there.)

The award for Mr. Deaton continues an extraordinary run for Princeton, whose
other recent winners include the game theorist John Nash; Mr. Kahneman; the
economic theorist Eric Maskin; the trade economist Paul Krugman, who is also a
New York Times columnist; and the macroeconomist Chris Sims. Mr. Krugman has
since moved to the City University of New York, while Mr. Maskin has returned
to Harvard. Even with these departures, Princeton is close to drawing even with
the University of Chicago, which still lists five economics laureates on its
faculty. There’s a pretty good chance that may happen, as several of Mr.
Deaton’s colleagues often feature on Nobel shortlists.

I spent a lovely year at Princeton as a visiting professor in 2012 and can
attest that no one commands greater respect among his colleagues than Mr.
Deaton. He’s an imposing presence, a man with a giant intellect and an
extraordinary breadth of knowledge, who holds all economists to his exacting —
indeed, intimidating — standards.

More than that, he’s motivated by the questions that really matter, he is
intellectually relentless, he has enormous integrity and he has devoted his
life to understanding and improving the lot of the poor. He’s the perfect role
model for any young economist.